The phenomenon of employees taking on “side hustle” projects or secondary projects is nothing necessarily new. The increase in secondary employment and multiple/diversified income streams has also been given a boost with the onset of COVID-19.
A number of Employers have taken to terminating the employment of employees due to secondary employment or side hustle being undertaken because they either:
So what can an Employer do with side-hustle employees and importantly how can an Employer protect their business
There seems to be a misconception that Employers can only direct an employee around secondary employment only in circumstances where there is an issue of direct competition. This is not necessarily the case. It is perfectly reasonable for a company to require an employee to seek consent for undertaking secondary employment even if there is no obvious conflict of interest.
The unfair dismissal case of Margherita Donelan v Commissioner of the Australian Federal Police ... (Donelan Case) is a good demonstration of this concept. The Donelan Case involved an AFP employee who became the director and shareholder of a Childcare centre. Although she claimed she only worked in mostly an administrative capacity her employer at the time noted the:
Even though the employee had requested a renewal for approval for 8 years straight she did not do so in the last few years. There is of course more to the unfair dismissal matter as there were issues around:
In any event, the Commissioner held and supported the view that the prescriptive policy around secondary employment was reasonable. There were directions made by her manager to fill in the appropriate form. For very flimsy reasons the employee did not fill out the forms and as such the dismissal claim was dismissed.
To be clear, whether there is a conflict of interest or even a perceived conflict of interest is no the sole and only rationale behind consent. In practical terms if an employee wants to undertake secondary employment (conflict or no conflict) it is completely reasonable for an Employer to require they seek consent first.
The duty of fidelity to employers is a fundamental concept in workplace and employment law, that is to be honest in its dealings, to show good faith and display loyalty.
For HR and Employers in industries such as:
The need for a policy to deal with secondary employment is paramount. For other industries it is still pertinent. A policy is an organic document that can be moulded and changed to dictate the standards required for an employee. Depending on how they are drafted and save for any contractual obligations they can be utilised as a right by the employer but at the same time have the flexibility to change the policy as they require. Of course the employee needs to know about the policy and is aware of any changes (training may be required as well).
The policy should set out the following:
An argument by an employee that the employer is “restraining them” from earning money is a usual one but can be displaced by having a policy of this type in place. In any event, there is good case law such as Callum Weatherall v Elevate Education Pty Ltd t/a Elevate Education... (Elevate Case) that supports the concept that setting up a company in direct competition with their employer will not be looked upon with any indulgence by the Fair Work Commission.
A policy though will solidify firstly the importance of requesting consent and disclosing an interest in secondary employment.
This is different to a situation where the employee has resigned and is unwilling to disclose their own confidential plans for future employment or business. Protection in these scenarios may lie elsewhere contractually.
Employment contracts are integral to dealing with issues around secondary employment. An employee’s side hustle cannot and should not encroach on the hours of normal work, and company property should not be utilised for this purpose either.
Yet in the Elevate Case, the employee amongst other things opened up a competing business wherein he had a similarly written website and advertisements to his employer. Although the employee claimed the business were not competing it was obvious from the evidence before the Fair Work Commission that website content and advertisements were very similar.
In the Elevate Case, the employer relied strongly upon their employment contract namely clauses relating to non-compete, confidentiality and intellectual property.
An employment contract should always be reviewed to ensure that clauses around the following are in place:
If they are not in place or the clauses are poorly drafted – variations to the contract should be in place and are highly recommended.
Importantly in the Elevate Case the Commissioner found that the employer had no case to answer and the application dismissed. The Commissioner also found it did not matter that the employee had made little income from the competing business.
As an added defence, a separate commercial confidentiality and intellectual property contract can turn defence into an employer’s offence. Instead of only relying upon an employment relationship, a separate commercial agreement gives further options for an employer to take action and seek injunctive relief.
It also demonstrates and supports an employer’s unequivocal view of secondary employment.
We strongly recommend clients who have employees creating products, software, code, documents or inventions that are integral to the company should also be subject to a commercial agreement.
Create offence from your defence – enquire about our 6 Point Legal Protection Review – by reaching out via email@example.com or +61 (07) 3876 5111 to book an appointment with NB Lawyers – Lawyers for Employers
Jonathan Mamaril leads a team of handpicked experts in the areas of employment law and commercial law at NB Lawyers – Lawyers for Employers who focus on educating clients to avoid headaches, provide advice on issues before they fester and when action needs to be taken and there is a problem mitigate risk and liability. With a core value of helping first and providing practical advice, Jonathan is a sought after advisor to a number of Employers and as a speaker for forums and seminars where his expertise is invaluable as a leader in this area as a lawyer for employers.
Add a Comment